European bank exposure to PIGS

You may be familiar with the mounting sovereign debt problems emnating from Greece in the last few weeks. Major european governments, led by Germany, are trying to hatch up a deal to avoid either a sell-off of the Euro and/or the disintegration of the EU bloc. There are various conflicting goals and I'm not sure what sort of deal will be cut. For instance, France has, in the past, indicated that they would prefer a weak Euro (likely to protect their manufacturing, tourism, fashion, and similar industries) so a mini "run" on the Euro is probably not a bad thing in their eyes. In contrast, several others have said they don't like a weakening Euro.

Regardless of national interests, I'm sure the EU members do not want its membership to disintegrate. The Euro, as a common currency, is probably facing its biggest threat since it was introduced. Bears like Jim Rogers have suggested in the past that the Euro will collapse and it can't be held together. It remains to be seen how the members handle this mounting crisis.

In any case, countries such as Germany are working out a deal to mitigate any potential debt crisis in Greece. Although seemingly altruistic, there is more to this story. Some of the biggest losers from any default would be the banks in countries like Germany. I ran across the following chart from Bloomberg, summarizing major European bank exposure to so-called PIGS (Portugal, Ireland, Greece, and Spain.) Some people also use the term PIIGS, which includes Italy.



The numbers aren't that large but, nevertheless, a million here and a million there, adds up. I'm guessing but I suspect the assets backing the claims shown on the chart are nowhere near as bad as the dubious real estate assets in America. So, the Greece situation is more of a political threat—calling into question the whole EU membership structure—rather than a financial crisis per se.

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